Monday, May 2, 2016
Last week was quite active in the earnings front as several large tech companies announced earnings. The tech heavy Nasdaq was quite volatile as investors reacted to the earnings announcements as well as future guidance.
Netflix announced earnings of six cents per share on April 18. However, future guidance was weaker than expected and shares tumbled in after-hours trading. Apple earnings disappointed investors, at $1.90 a share on revenues of 50.56 billion dollars, this was the first time since 2003 that Apple showed a revenue decline from the previous quarter. This slowdown is attributed to declining iPhone sales, as well as slowing growth in China. Nasdaq bulls were stunned by Amazon as blew away earnings expectations by posting earnings of 1.07 per share, far above Wall Street consensus of 58 cents and share prices rocketed upward in after-hours trading. Another case for the bulls was Facebook earnings. Facebook announced earnings of 77 cents per share, above the expectations of 62 cents per share. As Facebook nears their 4 year anniversary of their IPO, shares are trading near their all-time high of 120.79.
Turning to the 3 month continuation chart, the bears seem to be in control as there are several bearish signs present. 14 day Relative Strength Index (RSI) is a bearish oversold level at 25.31. Trading towards the end of last week caused the e-mini Nasdaq contract to drop below the 50 day simple moving average (SMA). The 20 day SMA is still above the 50 day SMA, a bullish sign, but the average has started to curve downward. Another case for the bulls is that although the contract price has dropped recently, trading is still well above the February lows at the 3900 support level.
Dale Jennings, Commodity Analyst